Bajaj Alone Amid The Ruins

Telco

Telco has been dealt a blow by the receding demand for commercial vehicles as a result of the industrial slowdown. It posted a loss of Rs 35.63 crore in the first quarter of 1998-99 compared with a net profit of Rs 90.50 crore in the corresponding previous period. Telco's total income has plummeted 31.7 per cent to Rs 1,277.43 crore. Operating profits have fallen to Rs 103.47 crore from Rs 241.78 crore last year. Operating margins have declined from 12.92 to 8.09 per cent. Interest burden is up marginally to Rs 74.8 crore from Rs 71 crore last year. Depreciation charges have risen to Rs 65 crore from Rs 61 crore.

 

The profitability was impacted by the continuing downturn, particularly due to the steep decline in demand in the more profitable medium/heavy commercial vehicle (M/HCV) segment. Production nearly halved to 25,803 units from 51,085 units last year. While domestic vehicle sales fell 40 per cent to 23,601 units, exports proved to be the saving grace showing an increase of 13.2 per cent in value terms.

The company has also attributed this performance to the loss of market share to its competitors. In the first quarter of 1998-99, Telco's market share in the M/HCV segment fell to 61 per cent from 75.49 per cent. According to the company had they maintained their market share, they would have been able to add another Rs 80-90 crore to their bottomline.

Telco is to launch its small car in the current year with the break even pegged at 60,000 vehicles per year. The company is bound to make losses in the initial period which will further affect its performance. Inspite of this performance the Telco scrip gained after the results as the losses were less than market expectations. However, one is advised to stay away from the scrip at the current time.

Bajaj Auto

Bajaj Auto has put up a good performance in the first quarter of 1998-99. It posted a rise of 12.19 per cent in net sales and a 14.79 per cent increase in net profit. Net sales rose to Rs 810.94 crore from Rs 722.79 crore in the corresponding previous period while net profit rose to Rs 112.17 crore against Rs 97.71 crore previously. The total vehicles sold in the first quarter ended June 1998 were 3.37 lakh units as against 3.02 lakh vehicles sold in the previous period. In the current year, the company is targeting a sale of 14.5 lakh vehicles, up from 13.54 lakh units sold in the previous year.

This performance just shows the renewed focus at Bajaj Auto. After having largely been a production company it is now turning into a marketing company which anticipates the needs of customers and develops products accordingly.

While the successful launch of some of its new models is reflected in the current performance, its performance, say analysts, could get better because of the slew of launches slated during the current year -- Bajaj has lined up about 10 new products across all segments of the two and three wheeler market. The company's strategy is to have a product to suit every need _ the Classic SL, Chetak and Super will cover the range in scooters. In motorcycles, Bajaj will be represented in almost every segment starting from the low end M-80 to the

stylish and high powered 110cc Mercury

and the upmarket Eliminator. These are slated for launch next year. The launch of Boxer and Caliber in the motorcycle segment itself are expected to drive volumes in this segment by 37 per cent in 1998-99, according to analysts.

Though the company has conceded some market share during the last year it has begun the current year on a strong note which should see it gaining market share. Further with LML in a spot of bother, Bajaj Auto could soon regain lost ground. The scrip could prove to be a good buy at declines.

L&T

Larsen & Toubro (L&T) has posted a 11.19 per cent decline in its net profit at Rs 72 crore for the first quarter ended June 30, 1998 compared to the corresponding previous year. Sales during the period have however grown by 16 per cent to Rs 1470.27 crore.

The company's major presence in the engineering and cement sector, both of which are going through a lean phase, has affected its performance. Both sectors largely rely on infrastructure development which has been slow to take off.

During the period L&T's operating profit increased from Rs 166 crore to Rs 181 crore. However, a higher interest outgo at Rs 35.82 crore and depreciation at Rs 65.13 crore due to the commissioning of its new cement plant has squeezed the bottomline. The commissioning of its Gujarat Phase II cement expansion project and the new Tadapatri plant for cement has pushed up its total clinker and cement sales for the first quarter to 19 lakh metric tonnes as against 15.95 lakh metric tonnes in the previous corresponding period.

L&T has booked orders to the tune of Rs 2,111 crore for the first quarter, 37 per cent higher compared to the quarter last year. Consequently, order backlog at Rs 6,134 crore at the end of June 1998 was also higher by 35 per cent. As such the company could improve its performance in the later part of the year as these outstanding orders could begin to get booked depending on the stage of execution of the orders.

The company has decided to sell its shipping division and this will strengthen its core businesses of cement, engineering, construction and equipment manufacture. However, L&T's performance in the future will hinge to a large extent on infrastructure development. At current level one can stay invested.

Mahindra & Mahindra (M&M)

M&M's net profit declined by 19 per cent to Rs 35.02 crore in the first quarter of 1998-99 as compared to the corresponding quarter of 1997.

This was mainly on account of higher depreciation and interest cost. In the first quarter, depreciation was up by 32 per cent to Rs 27.25 crore and interest cost was up 30.82 per cent to Rs 36.67 crore. Consequently profit before tax was down by 21 per cent to Rs 47.02 crore.

However, its sales for the period were marginally up by 3.3 per cent to Rs 808.45 crore as against Rs 782.69 crore in the first quarter of the previous year. Its sale of vehicles of completely knocked down (ckd) packs and exports, was 15,784 units against 16,502 units in the first quarter last year.

M&M's market share in utility vehicles has further improved to 56.7 per cent as against 51.7 per cent for the year ended March 1998. In 1997-98, the company had introduced seven models in the utility vehicles segment. These include the Voyager and Commander DI, Armada 1998.

In the tractor segment also its market share has improved to 27.7 per cent against 27.1 per cent in March 1998. During the quarter, sale of tractors in was 17,138 units against 18,500 units in the corresponding period last year. It has now submitted a proposal to the Gujarat government to acquire its 51 per cent stake in Gujarat Tractors Corporation, a company wholly-owned by the state. M&M has bid to acquire 78.04 lakh shares of Rs 10 per share.